South Korea’s Central Bank Chief as Policy Rebel

Feb. 22 (Bloomberg) -- Radical central banking is being
debated as never before as policy makers throw everything they
have, and then some, at safeguarding growth.

It’s often thought that Ben Bernanke and Mario Draghi are
the ones pushing the boundaries of monetary policy, if not the
dismal science itself. But neither the Federal Reserve chairman
nor the European Central Bank president is as unconventional as
their South Korean counterpart, Kim Choong Soo.

As the Bank of Korea governor navigates dueling crises and
a world flooded by zero-interest-rate money, he’s finding time
to agitate for social changes that may leave the economy better
off. They include scrapping a seniority system, empowering women
and arguing for increased immigration.

Kim’s first initiative since taking the job in April 2010
was to internationalize the bank. He was shocked to find that
not one joint research project was afoot -- not with the
International Monetary Fund, World Bank or any nation. Today,
his team is participating in 18, gaining new connections and
insights from around the globe.

The real shakeup came in the bank’s boardroom. Kim elevated
young staffers to senior posts, running afoul of Korea’s strict
age-based hierarchy. It was a revolutionary act in a system
informed more by the Confucian orthodoxy of the past than future
competitiveness. He also promoted a woman to run the financial
markets division. Suh Young Kyung is the highest-ranking female
in the central bank’s history.

Foreign Talent

More recently, Kim took on the verboten topic of importing
more foreign talent. With one of the world’s fastest-aging
populations, South Korea has gone from a country where labor was
the only abundant resource to one lacking enough people to run
the plants and farms of Asia’s fourth-largest economy. Putting
out a bigger welcome mat might bring new blood into the economy.

All this raises a question of great relevance to policy
makers everywhere: How far should a central banker go to fill
the void left by gridlocked government? It’s one that Kim, too,
has considered.

“I am not sure a central-bank governor is supposed to say
such things,” Kim said over lunch in Seoul earlier this week.
“But someone has to break the barriers. You don’t expect to be
popular.”

Kim, 65, was outspoken about the obstacles to faster
growth. When I asked about gender inequality in Korea, Kim
declared “it doesn’t make sense.” On liberalized immigration,
he said, “it’s the way to introduce competition into the
economy.” Kim made it clear he thinks there’s no need to change
interest rates, at 2.75 percent, for now, even though low
inflation would, in theory, give him scope to ease policy:
“There is no reason not to lower the rate, but there is no
reason to lower it.”

Yet it’s his stealth campaign to revitalize Korea’s $1.1
trillion economy that may be his real legacy when his four-year
term ends in 2014.

While some monetary purists may object, the end may justify
the means. If this rankles elected officials, maybe it’s because
Kim is suggesting they aren’t doing their jobs. The biggest risk
facing South Korea as 2013 unfolds is complacency. Yes, the
developing world can certainly learn from South Korea, which is
now numbered among the developed nations. It steered around Wall
Street’s 2008-2009 crash nimbly and impressively. The country is
set to grow a respectable 3.3 percent this year, up from 2
percent last year. As Kim sees it: “I put a little more
emphasis on the upside risks.”

Kim’s interventions in political controversies are rare in
conservative South Korea. The structure of the economy can’t
remain static while the world evolves around it. South Korea’s
obsession with age is a case in point. Deference to experience
and skill can be important, of course. The trouble is when the
top echelons of the Bank of Korea, the Finance Ministry or
corporate boards are loaded with like-minded lifers and too few
working-level employees with differing viewpoints.

This cultural sclerosis feeds a chronic gender imbalance
that deprives the country of the skills and talents of half its
50 million people. A reason South Korea does so dismally in the
World Economic Forum’s ranking of female empowerment, behind the
United Arab Emirates, Burkina Faso and Cambodia, is indifference
among the men who long ruled the nation. It’s worth asking if
President-elect Park Geun Hye, Korea’s first female leader, will
champion the cause. Doing so, though, would be to break with her
New Frontier Party’s tenets.

Those who worry that unelected officials such as Kim might
overstep their bounds should blame politicians who fail to
perform. Say what you want about Bernanke’s ultralow rate
policies, the Fed bailed out an inept U.S. Congress when crisis
hit. The same is true of Draghi’s stealth monetization of
European debt as leaders dither.

If politicians are too timid to act in today’s world,
central bankers may feel compelled to. That’s as true in South
Korea as any place. Someone has to do it.

(William Pesek is a Bloomberg View columnist. The opinions
expressed are his own.)

To contact the writer of this article:
William Pesek in Seoul at wpesek@bloomberg.net
or @williampesek on Twitter.